Data could be paramount in customer acquisition, Connecticut launches smoothly and other notable stories in the sports betting and iGaming space.
Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Gan Limited (GAN) announced it has signed a binding terms sheet with Red Rock Resorts (RRR) to build and deploy the infrastructure for Station Casinos' "STN Sports" online sports platform, mobile applications, and retail Over-the-Counter and Kiosk-based sports betting throughout Nevada. A commercial launch is subject to regulatory technical certification and related regulatory licensing, the latter of which the company has now commenced. The agreement pertains to Red Rock Resort's current portfolio of properties and projects in development, Gan noted. Dermot Smurfit, CEO of GAN, said: "After a comprehensive and competitive process, we are greatly pleased to secure our first major US retail casino operator client of our omnichannel sports betting technology and managed trading services solution acquired at the outset of the year and demonstrated at G2E earlier this month. The GAN team worldwide is excited to enter the U.S. sports' market next year with a market leader in Nevada."
Score Media (SCR) announced that the Supreme Court of British Columbia has issued a final order approving the previously announced plan of arrangement pursuant to which Penn National (PENN), by way of its subsidiary, will acquire all of the outstanding shares of theScore. Earlier in the week, Score Media and Gaming announced that holders of its Class A subordinate voting shares and special voting shares have voted in favor of the previously announced acquisition by Penn by way of a plan of arrangement at the company's special meeting of shareholders held on October 12. Subject to satisfaction or waiver of the other conditions to closing contained in the arrangement agreement with Penn National, the arrangement is expected to close on October 19, the company said.
Dolby Laboratories (DLB) and MGM Resorts (MGM) announced the launch of Dolby Live at Park MGM, the first fully integrated performance venue of its kind to offer live concerts in Dolby Atmos. "Located in the heart of the Las Vegas Strip, Dolby Live is the preeminent location for live music in Dolby Atmos, which offers guests a transformative music experience they won't be able to find anywhere else in the world... While the system will be primarily used for live concerts, it has the capability to support a multitude of live events in Dolby Atmos such as musicals, eSport events and more," the companies said.
DraftKings (DKNG) announced it has agreed to a deal with the National Hockey League to become an Official Sports Betting, Daily Fantasy Sports and iGaming Partner of the league in the United States. To complement the deal, DraftKings has also reached an agreement with Turner Sports, including Bleacher Report, to be the exclusive sportsbook and daily fantasy sports provider for their coverage of the NHL. As an Official Sports Betting, Daily Fantasy Sports and iGaming Partner of the NHL, DraftKings will be granted access to NHL assets which will enhance the DraftKings' product experience including the use of official marks and logos, as well as themed sweepstakes and enhanced promotional efforts both during the regular season, NHL All-Star Weekend and throughout the Stanley Cup Playoffs and Stanley Cup Final. DraftKings will also have the opportunity for a variety of content integrations across the league's digital and linear media platforms. Under the arrangement with Turner Sports, DraftKings will provide sports betting information and daily fantasy content across Turner Sports telecasts and Bleacher Report digital channels including the B/R app. Planned integrations include DraftKings' betting odds and daily fantasy statistics, original content, personalized automated alerts and editorial across B/R channels including the B/R Betting vertical, the most engaged digital sports media brand in the sports betting industry.
Scientific Games (SGMS) has finalized a new technology agreement with longtime lottery partner Lotto Hessen in Wiesbaden, located in central Germany. The company will launch its new Symphony gaming systems technology, migrating the AEGIS gaming system it currently provides. Scientific Games, Europe's largest lottery technology and business solutions provider, will serve Lotto Hessen with software support from its tech facility in Vienna, Austria.
PROMO OVER PROFIT?: Sports betting operators are stealing a page from the playbook of tech giants like Netflix (NFLX), Amazon (AMZN) and Twitter (TWTR), sacrificing near-term profitability in hopes for the potential customer retention in the long-term, Kate Marino of Axios reported. Sports betting ads have been basically everywhere, especially with the NFL season in full swing. A Trust analyst contends this NFL season will go a long way in determining which companies live to fight another day in the ultra-competitive sports betting arena “This football season is crucial, as more states legalized sports betting going into this season, and football is really the culmination of the U.S. market,” Barry Jonas, equity research analyst at Truist, told Axios. FanDuel (PDYPY) and DraftKings have taken the lead with market shares of 33% and 19% respectively, in the first half of 2021, the article notes, citing a Wells Fargo report . MGM’s BetMGM has a 13% share and Caesars Casino & Sportsbook owns about a 4% share as it just formally launched in August. These legacy casino companies are reportedly including hundreds of dollars of free bets in their promotions. Marino notes analyst consensus seems to be that consolidation is ultimately the most likely endgame, with 3 to 4 players controlling the field. She notes a potential catch 22 for sports betting operators; "Making too little money is obviously bad for business, but if they start making too much money — it may attract the attention of regulators."
CONGRESS OF SPORTS: Morgan Stanley analyst Thomas Allen attended virtually the CAA World Congress of Sports this week, which made him more bullish on the scaled sports book operators and business-to-business providers, such as Sportradar (SRAD) given the "importance of infrastructure" in customer acquisition and retention. Allen told investors in a research note that the National Football League has built up a database of 120M fans and data sharing provisions in its new TV deals have given it access to 190M viewers. The analyst noted the NFL sees sports betting as the next data mine, part of a metaverse of different consumer touch points. Apparently, there is a shortage of scientists to generate insights from the NFL's vast amounts of data. Allen noted Sportradar has about 8,300 data journalists and approximately 740 engineers, Allen initiated coverage of the stock with an Overweight rating and $27 price target. Allen highlights what he sees as four key positives: Sportradar's significant exposure to the high-growth global sports betting market; the fact that the company is the "scaled leader" with about 40% market share in the concentrated business-to-business sports data distribution sector; Sportradar's diversified, recurring revenue streams; and its proven scalable high-margin business internationally that should translate to higher consolidated margins over time as its U.S. business matures. He thinks a multiple comparable to peer Genius Sports (GENI) and similar growth SaaS stocks is justified.
ESPN COULD FACE SPORTSBOOK POACHERS: Front Office Sports reported ESPN (DIS) insider Adam Schefter could depart the company after his contract expires in the summer of 2022. Caesars Sportsbook is reportedly preparing to go after the company veteran. In regards to the NBA, Front Office Sports also reported Caesars could make a run at basketball insider Adrian Wojnarowski. Of note, Caesars has already selected the ESPN talent network, recently hiring Kenny Mayne and Trey Wingo. “The competitive landscape is shifting under our feet as we speak,” a source told Front Office Sports. “The legacy networks want to cut or maintain talent salaries. The gambling companies are flush [with money] — and increasingly willing to spend for sports media talent," according to the report.
CONNECTICUT LAUNCH UPDATE: The soft launch of online sports betting in Connecticut seems to be smooth sailing, at least for the Connecticut Lottery and Rush Street Interactive (RSI), Matthew Waters of Legal Sports Report reported. The two aforementioned entities launched the PlaySugarHouse app Tuesday at noon and saw its maximum of 750 players fill within four hours, Lottery President Greg Smith said, He also noted that the Lottery was prepared to reach out to bettors for the soft launch, but those 750 signed up organically. Roughly, 3,000 bettors signed up since account creation could start last Friday. The 750 people on the Kambi-powered PlaySugarHouse app bet more than $60,000 over Tuesday and Wednesday. That did not include any free bets, of which Smith said there were a “fair amount.” The largest bet was just under $1,800 while the smallest was 10c. The average bet was about $45, Smith said. Most accounts have deposited funds and some winners have already processed withdrawals.
ANALYST COMMENTARY: While the NFL season keeps chugging ahead full-speed, a number of companies have drawn new interest from analysts. For example, JPMorgan analyst Joseph Greff views Penn National as an "interesting near-term idea" heading into year-end, citing its high short interest and negative investor sentiment, "undemanding" valuation, share price underperformance and "relatively solid" land-based casino operations. In addition, there is little to no equity value in the stock for the Barstool Sports media platform, which is run rating $200M in annual revenues with north of 100M monthly active users, Greff told investors in a research note. He points out that Penn is most shorted stock in his U.S. coverage group. Greff keeps an Overweight rating on the shares with a $92 price target.
On the other hand, Roth Capital analyst Edward Engel initiated coverage of Penn National with a Buy rating and $107 price target. He believes Barstool and myChoice "offer the most efficient and complementary customer acquisition channels in online gaming" and while investors are concerned with Penn's ability to bring online sports betting technology in-house, he sees an opportunity to adapt a hybrid model, Engel said. He thinks Penn can leverage an "evolving ecosystem of highly specialized risk and trading functions from emerging third-party B2B service providers," the analyst added.
Engel took the opposite route for DraftKings, initiating coverage of shares with a Sell rating and $41 price target. While bullish on U.S. online gaming, he doesn't believe 70% market share for the three leaders - Fanduel, BetMGM, and DraftKings - is sustainable, Engel told investors. He sees DraftKings conceding market share as mid-tier operators ramp up and better cross-sell legacy casino customers and he also sees the early market share benefits of DraftKings' Daily Fantasy Sports products fading as markets mature.
On the other end of the spectrum, Citi analyst Jason Bazinet initiated coverage of DraftKings with a Buy rating and $66 price target. The online sports betting and internet gaming market offers investors exposure to "robust, long-term growth," Bazinet told investors in a research note. The analyst expects DraftKings to be a net beneficiary as customer acquisition rationalizes and the market consolidates. He also believes current Street expectations for payer growth are reasonable. Additionally, Bazinet initiated coverage of Genius Sports with a Buy rating as well and $22 price target. The online sports betting and internet gaming market offers investors exposure to "robust, long-term growth," Bazinet tells investors in a research note. The analyst says Genius is well positioned within the sports betting value chain, and offers an "attractive" growth profile.
Credit Suisse analyst Benjamin Chaiken upgraded MGM Resorts to Outperform from Neutral with a price target of $68, up from $33. The company has "gone through a transformation," recently announcing four transactions, that the market is not giving it full credit for, Chaiken tells investors in a research note. He now sees MGM as a "cleaner more simplified organization" with a more attractive capital structure. Chaiken believes MGM too can beat consensus estimates.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR) and Wynn Resorts (WYNN).